America after Covid-19
On October 14, 2020, Nicholas Eberstadt delivered the 2020 Irving Kristol Award Lecture. Watch his lecture “America After COVID: Which Future?” or read the transcript below. Dr. Eberstadt is Henry Wendt Chair in Political Economy at AEI and a Senior Advisor at the NBR.
Thank you, Robert. This honor is also a sentimental pleasure. At AEI, I am what you might call a lifer—still enjoying the extraordinary privilege of serving here, 35 years and counting.
And my debts of affection and gratitude to Irving himself are immense. Not least: I might not have met Mrs. Eberstadt if he hadn’t hired her at the Public Interest magazine. Mary and I are just two of the legion of aspiring young writers Irving went out of his way to encourage over his long life. Like his remarkable wife, historian Gertrude Himmelfarb, Irving Kristol is an unforgettable inspiration. I only wish everyone listening could have known them too.
AEI Irving Kristol Lectures, like the Boyer Lectures that preceded them, wrestle with weighty issues of the day. But it is fair to say no one could have anticipated last year, when this prize was awarded, the pass in which we now find ourselves. So today’s lecture could hardly avoid addressing our current crisis.
Two very different paths for America lie before us at the end of the COVID pandemic. One is to a future of stagnation and division. The other is to a future of revitalization and hope. And the choice is ours to make.
I’m going to argue we can grasp the future that includes national solidarity and progress for all. It is entirely doable. We already pretty much know how. We just have to want it—and not lose heart.
My message is directed especially at younger Americans—those of you who don’t really remember our country before the Great Recession, before 9/11, before the spread of the “New Misery.” You will be the ones in charge of the American experiment tomorrow—the ones who will have to do most of the heavy lifting in revitalizing our nation.
Like your forebears, you will learn firsthand America’s amazing capacity to mend its flaws, improve, and advance. We have a record of doing this again and again and again, for almost 250 years. Your country—your fellow citizens—are worthy of your unalloyed devotion—deserve it, actually. Someday you will be able to tell your children why the American future is always worth the struggle.
America after Covid-19: Which Future?
America is in the midst of its greatest crisis since the Second World War. The novel coronavirus is a pathogen with which humanity has no previous experience. When we will create a safe and effective vaccine and how many waves of contagion will roll through our country before COVID subsides are at present unanswerable questions.
Under the pressure of the pandemic, fault lines in our country have been painfully exposed. We endure not only a socioeconomic emergency but an explosion of anger and radicalized violence in our streets. These troubles have historical roots: problems long festering and long ignored.
Washington has responded to the pandemic with an unprecedented peacetime mobilization of national resources. Congress has authorized trillions of dollars in spending to support distressed businesses and households, and the Federal Reserve System has committed trillions more—with no end yet in sight.
In relation to national income, today’s state outlays for the COVID crisis are comparable to our peak defense effort in World War II. Just as in the Second World War, we are now embarked on an enormous expansion of government reach and public debt.
Eventually we’ll achieve our national objective in the struggle against COVID-19. Victory in World War II was followed by rapid military demobilization and wholesale dismantling of wartime economic controls. But what of the post-pandemic era? How will we “demobilize” the super welfare state hastily thrown together to prop up shaky businesses and cover shortfalls in personal income? How will we renew economic growth so we might, among other things, cope with our vastly increased public debt?
If we simply muddle through, we are likely to muddle into a nightmare: an American future defined by a new socio-corporate welfare state; a stagnant, politicized economy; and deep financial dependence on officialdom, both elected and otherwise.
In such a future, democracy would be degraded, freedoms lost, divisions enflamed, tomorrow’s promise squandered. Were we to settle for such a future, we would be the Americans who chose against exceptionalism—who decided that being just another sluggish, demoralized “social democracy” was good enough for us and for posterity.
To steer away from this grave danger, we need a very different vision of the future. Such a vision should of course posit a rapid and orderly build-down from war-style mobilization by the US government and its central bank.
But simply restoring the pre-COVID status quo ante is not a hill many would be willing to die on. That was a world where the American dream was already faltering, where too many Americans, especially younger Americans, were mired in a previously unfamiliar “New Misery.”
As we look beyond COVID, we have the opportunity to repair America’s pre-pandemic flaws. We should be seeking a social and economic revitalization of our nation, a bold and thorough overhaul of our public and private ways to spark a dynamic upswing in progress for everyone. The vision, the design, should be prosperity for all. This can be done. A revitalized America is a prize worth fighting for.
Let’s start with the long-run implications of the current crisis. The bad news is that the pandemic has made the task of revitalizing our nation more difficult. But the good news is it has also made the need for such revitalization more difficult to ignore.
To prevent collapse of the US economy and financial system during the nationwide COVID lockdown, Washington unleashed a tidal wave of public resources. With the economy in freefall, the impulse to act urgently and “go big” was surely the right call. Yet urgency also meant that the largest single “state surge” in American history was necessarily improvised, characterized not only by intended consequences but by unintended, unconsidered ones.
Government transfers now account for much more of the American family budget than ever before and will continue to for an indefinite duration. Since all the COVID “stimulus” is deficit spending, public debt is soaring. To what heights is still anyone’s guess. We’ll certainly exceed World War II debt ratios soon—and additional rounds of COVID-driven deficit spending may still lie in store. The Congressional Budget Office just projected that the federal debt will be almost twice the size of the US economy by 2050—two and a half times the pre-pandemic ratio. Apart from Japan, virtually no country on earth grapples with such a debt burden today. (More on Japan in a moment.)
However, the full dimensions of the government’s new role in US economic life are not revealed by fiscal numbers alone, for those overlook a colossal off-budget item, important not only in magnitude but in nature. At the behest of Congress and the Treasury Department, our Federal Reserve System has crossed a Rubicon. With its new pandemic rescue mandates, the Fed readies to the role of managing and even micromanaging the American economy through credit allocation, potentially lending vast sums not only to financial institutions but also directly to firms it judges suitable for government support. The Fed already dominates the markets for US Treasury debt and mortgage debt as a result of previous, lesser crises. It is by no means inconceivable that the current crisis will propel it to a comparably dominant position in domestic commercial credit.
These dramatic transformations of our economy, remember, are the intended consequences of our pandemic measures. But a host of unintended consequences are also embedded in these policies—and they pose direct risks to American freedom and prosperity the longer the measures remain in force.
Consider the special $600 a week pandemic unemployment benefits. These came on top of existing unemployment benefits, regardless of one’s wealth or income. The year before the crisis, about a third of all jobs in the US were paying less than that $600 a week. When added to regular unemployment benefits, this pushed payments for the jobless above the median wage level in 36 of the 50 states. Welcome to a “Lake Wobegon” job market, in which all men and women can get an above-average salary—so long as they do not work.
One study estimated spending by pandemic unemployment recipients was 10 percent higher after the onset of the crisis than before it. Pandemic benefits, in other words, could be a jackpot—and you didn’t actually have to be unemployed to take the bonus home. In September 2020, about 12 million Americans were looking for work, but over twice that number were collecting some form of unemployment insurance.
Fortunately we can still rely on a widespread American work ethic to resist disincentives dangling from pandemic packages. For the sake of the dreams our work ethic serves, let’s not try to find out how powerful those bad incentives might be over the long run.
Then there is the whole new realm of unintended consequences in the Fed mission to rescue the US economy. The Fed has announced it will become a player in the corporate debt market, and it is preparing to lend directly to private concerns on highly favorable terms. Its rationale is that financial markets will not voluntarily dispense sufficient credit to US businesses on their own—a premise that is unfalsifiable, open-ended, and potentially self-fulfilling.
Leave aside the unavoidable, and unavoidably corrupting, politicization of the private sector that would occur when every big business wants to become a “friend of the Fed”—and many will need to be. The mission itself promises to end in failure, for the assignment is an exercise in adverse selection.
The record of industrial policy in other parts of the world—Europe, Asia, Latin America—is littered with failures, often expensive ones. But at least in those other experiments governments were attempting to “pick winners.” The Fed’s mandate is to “pick losers”—companies whose debt is not of “investment quality.” We know already how this movie ends: with misallocation of capital on a massive scale, unnecessary destruction of wealth, and ultimately, weaker economic performance and slower growth.
Easy money and low-interest loans are procured at the expense of others—your expense—and the long-term costs are greater than generally appreciated. Since the crash of 2008—for over a decade—the Fed has mainly been enforcing near-zero interest rates, and there is now talk of keeping rates near zero for another seven years. That would make nearly two decades of mostly “emergency” monetary policy.
The argument during the Great Recession was the Fed should do everything to help businesses survive because they were so fragile. But the completely unsurprising consequence of long-term, ultra-low interest rates is a new breed of businesses that can only survive in a low-interest environment. Such “zombie companies” scarcely existed 20 years ago, but by one estimate now account for nearly a fifth of all securities listed on US exchanges.
“Zombie companies”? Previously unimaginable levels of public debt? Never-ending super-low interest rates? Does any of this sound familiar?
Yes. We have seen it all before—in Japan, during its ongoing “lost generation” of growth, a saga unfortunately now heading into its second generation.
Before COVID, Japan had been creeping along for three decades on less than 1 percent a year growth in per capita output—a pace that takes nearly 80 years to double incomes. The specter of “Japanification” is already haunting Europe; soon it could be coming to your town too.
Japanification was not a natural disaster. It was man-made, largely through years of inadequate reform and response in the face of a major crisis, the bursting of the Japanese financial bubble. Japan, you see, kept accepting excuses for extending special “emergency” budget and banking measures, year after year….
Should we create something like our own Japanification, we may not fare as well under it as Japan—for we were and are beset by preexisting conditions that did not afflict the Japanese.
Now let’s look at those preexisting conditions. Although the need for revitalizing America is more pressing because of the pandemic, that imperative does not arise from the emergency itself.
Forty years ago this month, Ronald Reagan concluded his campaign for the presidency with the penetrating question, “Are you better off than you were four years ago?” For America today, the question would be: “Are you better off than you were 40 years ago?” If we are being honest with ourselves, the unvarnished truth is that growing numbers of Americans were not, even before the pandemic. America’s engines for material success and personal advance were already in serious need of repairs.
Some will find this assessment preposterous. After all, our summary record of national performance since the Reagan years is a marvel. Thirty years ago, we won the Cold War and became the planet’s sole superpower—a title we still hold. Over that same period, we tripled our private wealth—adding almost $75 trillion of real net worth, nearly a quarter of a million dollars per American man, woman, and child. Even now, in the midst of the pandemic, stock markets are near all-time highs! Never before has the world seen a system that could generate so much power and prosperity.
But during our unipolar moment, a strange new sickness was quietly eating away at our nation. For the most part, our elites—our deciders and describers—didn’t notice; it wasn’t affecting them or the people they knew. But in the glare of our current crisis, that ailment can no longer be neglected.
Call it the “New Misery”—social afflictions from America’s Second Gilded Age, disorders only a fabulously wealthy nation could afford and sustain. Alas, symptoms of the New Misery abound:
Although our nation has never been so rich, never have so many been living on so-called “poverty” benefits.
- Although health and longevity for young and middle-aged parents are vastly better than in earlier times, never have so many children been living as if orphaned, with just a mother, just a father, or sometimes just grandparents.
- Although our economy celebrated “full employment” on the eve of the pandemic, our work rate for prime-age American men mirrored levels from the tail end of the Great Depression.
- And although our national net worth has been soaring for decades, net worth for households in the bottom half was actually lower when the pandemic hit than when the Berlin Wall fell, 30 years earlier.
No one can look at such results and claim that a rising tide was lifting all ships.
But what accounts for these miserable contradictions? The conventional diagnosis is structural economic change in our age of globalization and technological disruption. There is truth here—but it is not the whole story, or even most of the story. For modern America has become ever more ensnared in a “tangle of pathologies” that predates the latest globalization. Many people are still in denial about this fact.
Daniel Patrick Moynihan coined the phrase “tangle of pathologies” in his seminal 1965 report on the crisis of the black family in America. Moynihan warned that family breakdown and its ramifications—illegitimacy, absent fathers, welfare dependence, and more—were undermining social and economic progress for black Americans and would limit the gains that civil rights reforms seemed to promise.
The Moynihan report got many things right, but we now know that it was wrong on one critical point. Since he traced the crisis of the black family to the “centuries of injustice” African Americans had withstood under slavery, subsequent institutional discrimination, and continuing racial prejudice, Moynihan believed it was unique—an awful aberration, not a preview of the American future. Yet far from constituting a tragic exception, the social turmoil that Moynihan described proved to be a prefiguration of trends in store for citizens with no such legacy of race-based mistreatment.
Births out of marriage, family breakdown, and welfare dependence are more common today nationwide than among black Americans back when Moynihan sounded the alarm. The “tangle of pathologies” is rampant now in Yankee New Hampshire, where a third of births are out of wedlock, one in four children lives in a single-parent home, and 35 percent are being raised on “poverty” benefits. Even predominantly Mormon Utah is no longer immune to these pathologies: Nearly one baby in five in the Beehive State is born to an unwed mother, and a quarter of its children live in means-tested homes.
Worklessness and crime likewise figure in our nationwide “tangle.” Back in 1965, one in eight prime-age black men wasn’t holding down a job; last year, in a supposedly booming economy, the corresponding rate for men of all ethnicities was even higher. Over 90 million American adults—nearly three in eight—now have criminal-arrest records.
Yet we don’t pay much attention. As social pathologies go mainstream, there is a temptation to normalize them by “defining deviancy down” (another fateful Moynihan insight).
There were other ways we normalized some of this behavior. When postwar economic growth began its long slowdown, America entered into a new social compact with the poorer half of its people. Call it our modern Declaration of Dependence.
In this ugly deal, we Americans tried to buy social peace by underwriting improvements in how the other half lives—through welfare and debt. No matter what they say or how they posture, both political parties are complicit in this arrangement, which is why it has continued for decades.
Between 1985 and 2017, the share of Americans in homes depending on poverty benefits more than doubled, and America’s means-tested citizenry nearly tripled. In effect, nearly all of our population increase since the Reagan era was of means-tested Americans.
Welfare dependency in America has a new face. These programs are no longer just for vulnerable women and children. Grown men in the prime of life, traditionally society’s providers, are now a major constituency for public aid. In 2017, over one in four prime-age American men took poverty-conditioned benefits—triple the share in 1985. If we add in payments from our highly problematic disability programs, even more were on some form of government dole.
Yet, in all the commentary on the “endangered American middle class,” rising welfare dependence is hardly ever mentioned. What a curious oversight. Plainly, “middle class” is defined not by a paygrade, but rather by a mentality. You can have a low income and still consider yourself middle class. But if you seek and accept public benefits eligible only to the poor, your membership in the middle class is in jeopardy, and you probably know it.
As large portions of America became increasingly dependent on means-tested public largesse—such spending now averages around $6,000 per recipient—Americans’ finances also grew strangely precarious. The numbers are shocking. Nearly three in eight American homes today are rentals. Most are too near a hand-to-mouth existence. In 2019, half of all renters had a net worth of under $6,000. Over half of renting seniors had less than $7,000 to their name. Nearly half of all female-headed renter families had less than $2,000 in net worth.
Moreover, whether renters or homeowners, the lower half in America saw its mean net worth fall between 1989 and 2019—by a sixth or even more, depending on which measure of inflation one prefers. Despite decades of swelling national wealth, these Americans are far more leveraged today than in the Reagan era; personal debts and loans have eaten away their net worth.
To make matters worse, American voters don’t want to pay for the means-tested benefits bolstering recipients’ living standards, so we’ve been borrowing money to cover them. Actually, this is true for all our social entitlement programs, not just those earmarked for those willing to think of themselves as “poor.” That is the meaning of the past four decades of near-continuous budget deficits, of the unprecedented run-up in peacetime public debt in the era when transfer payments came to dominate our public finances.
Since public debts are taxes postponed, we are consuming entitlements we’re unwilling to pay for—and instead taxing future workers for them, including workers not yet born. The fecklessness of our après nous le déluge Keynesianism was perhaps most nakedly revealed in our last budget before the pandemic, when Washington ran a deficit of nearly $1 trillion at the top of a business cycle.
Our social enervation and fragile finances find an echo in the national economy. Dynamism seems to be steadily ebbing. True: America’s top corporations are still world beaters, the envy of regulators in other lands. These giant gladiators cast a long shadow. Maybe that is why we don’t always notice what is going on in the rest of the private arena.
Simply put, there is less creative destruction, the lifeblood of free enterprise. The ratio of new startups to existing businesses has been falling for over 40 years. Accompanying the decline of “garage entrepreneurship” has been a continuing drop in labor market “churn”—switching jobs. “Quits” are down, too, and while that may sound good, it is partly a vote of no confidence in opportunities elsewhere.
Structurally, American business is increasingly grey and top-heavy, dominated by older, larger corporations with easy access to capital at rates smaller businesses can’t obtain and aided by fixers and regulatory consiglieri little firms can’t afford. By some important yardsticks, we see increasing market concentration and decreasing knowledge diffusion—more laggards falling behind on the learning curve. This is not a recipe for improved productivity. It should not surprise that our decade of growth after the Great Recession was the weakest snapback ever recorded.
As we look beyond COVID, growth prospects are not so auspicious. Warning lights are both social and institutional.
Economic progress in the modern economy depends on human resources and business climate. Yet over the past generation, despite our renowned and unaccountably expensive health care system, we have eked out barely one extra year of life expectancy per decade, with some slight declines since 2014, partly because of America’s unpredicted opioid crisis.
After leading the world in educational advance for a century and more following the Civil War, America’s progress in attainment suddenly threw a gear; for over a generation it has been just limping along, as others surpass us in mean years of education. And it is hard to argue that America’s business climate has improved in the 21st century. Tax cuts notwithstanding, many indicators show some drop in America’s quality of institutions and policies over the past two decades.
Unless we change these trends, post-COVID America is in danger of distinctly slower economic growth than we are as yet accustomed to, even as public debt booms. We could find ourselves drawn closer and closer to our own Japanification, one more unpleasant than the original. If we are to redeem the promise of the American future, we need to prepare right now to achieve escape velocity from a future of stagnation, dependence, and division.
In sum, the problems facing our country today are serious. Describing them closely, however, does not make them hopeless. No, it details what we need to fix, repair, and improve. A revitalized America is ours for the asking.
The burden of revitalizing our nation will fall mainly on the shoulders of today’s younger Americans. I’d like a word with you, please.
You arrived at a surprisingly unsettled juncture in our national history, and your American experience has been in important respects unlike any before. You’ve inherited our American sense of fair play—but grown up seeing too much that violates it. You’ve watched too often as people calling the shots seem to place your interests, the interests of our common future, last. You see people who should be protecting others instead gaming the system for themselves. You’re connected to everything—but you’re so isolated. You resonate with irony, but irony doesn’t fill that place where meaning and purpose are supposed to go.
Our culture, our society, our nation: None of these asks enough of you. What I have in mind for you is a big ask. A world-changing ask: the national renewal of a great country that needs you.
I don’t have a plan to show you. A plan won’t bring our fractured nation together for a common purpose. We need vision: the vision right now for where we want to take our nation tomorrow.
We must envision a more dynamic, rapidly advancing, and self-reliant America—an America that can generate prosperity for all, an America with both more freedom and stronger families and communities than at present, an America in which our citizens are less beholden to infantilizing handouts, more fully in charge of their own pursuit of happiness.
The arithmetic of American revitalization depends, first and foremost, on a broad, sustained upswing in national productivity, the springboard for rising living standards. Reversing of our anemic performance is crucial to instilling the confidence that will help dispel the New Misery.
It is important to recognize that we already know much of what has to be done.
We need more and better research—both public and private. From defense to infrastructure to climate, scientific advances and breakthroughs make the pressing tasks before us a little easier. Like any resource, funds for research and development (R&D) can be used unwisely. But in a revitalizing America, we would be investing much more heavily in this aspect of America’s future. Israel, South Korea, Taiwan, Sweden: All devote more of their economies to R&D. We used to lead the world here; we should want to again.
We need more and better education and training—much more. Had we only maintained our former tempo of progress, America’s working-age population would have nearly two additional years of schooling today—even more for younger adults. This shortfall has lowered current US output by trillions of dollars a year and skewed the distribution of opportunities unforgivingly. In what economists call America’s “race between technology and education,” lagging education makes for labor displacement, with flagging wages for the less skilled to boot. Should we really be surprised by what has happened to our nation’s employment and earnings profiles since our Great Slowdown in educational progress? More and better education will make for more work and better wages, increased opportunity, and the return of that welcome, invigorating “churn.”
America’s other big innovation problem is the sclerosis, complacency, and rent-seeking in our private sector, especially in big business. America cannot succeed unless a lot of its firms fail—including its largest ones. Bankruptcy and reallocation of resources to more productive ends are the mother’s milk of dynamic growth in competitive markets. There should be no room for corporate welfare in a revitalized America. Bring on the corporate “zombie apocalypse”: America will thrive from it. Let’s also save some creative destruction for those increasingly essential but bloated government-dominated sectors, health and education.
Dependency foments helplessness and incapacity, wastes human potential, and kills dreams. A revitalized America must offer a pathway from dependency back to self-reliance. This will be easiest with dynamic growth, but in any case will require rethinking our sprawling, largely dysfunctional social welfare system. To the fullest extent possible, social welfare arrangements should be reconfigured on a “work-first principle,” with active employment or job-seeking conditioning other benefits.
Know what’s so great about work? It is service for others that also helps complete you. Most older Americans know this, and thanks to “healthy aging,” the horizons for such service are wider than ever before.
Of course, a host of unintended consequences could attend subsidizing employment, so introducing a work-first principle bears careful consideration and will unavoidably create problems of its own—but pursued correctly, we are likely to be trading a larger set of problems for a decidedly smaller set.
This brings us to demography, the vital factor that may spare us the plight of a shrinking, atomized society. The two most important demographic questions for a revitalized America concern family and immigration.
Some truths about the family are so obvious it would take an expert to miss them. Family is the basic building block of society and nation, so the health of our country depends on the health of our families. Without presuming the Solomonic wisdom to judge any single family situation or circumstance, we can confidently prefer more intact families to fewer; greater to fewer numbers of lasting, committed marriages; more to fewer children born within marriage; more time at home, not less, for parents and children.
We also know that bonds of kinship are the first and still strongest safety net our species has developed. Weak and fractured families spawn public welfare systems—and we have learned, through sad experience, that the state is a highly imperfect substitute for the father, an impossible substitute for the mother. Family revival would powerfully buttress national revival. It will come on its own organic schedule, abetted by recovered social wisdom and maybe even one of those unsummoned Great Awakenings to which America seems so providentially prone. Government can cheer this project on and amend its own anti-family bias—but ultimately this is a project for the American heart.
Immigration has been a great, defining blessing for our nation. Current and future immigrants will play an important role in revitalizing America. People who risk everything to come to our country to start a new life embody the American spirit; that is why immigrants generally make such fine Americans. Our American creed seems especially suited to molding newcomers into loyal and productive citizens. There is an argument for favoring highly skilled immigrants in the future, and it has merit. But the grit and ambition and family values of immigrants with little formal education should have a place in our country, too; talent and entrepreneurial drive do not always arrive with academic credentials.
That said, immigration, like globalization, must work for Americans—not the other way around. Our national sovereignty is nonnegotiable: We Americans get to choose who is invited to our land—no one else. My own preference is for fairly high immigration quotas—but whatever the level, immigration should be legal immigration. Illegal immigration is not only an affront to our rule of law; it is an affront to our democracy because it circumvents the will of the people. America’s immigration process is badly broken, so let us Americans fix it.
A key indicator for our national revitalization will be wealth trends for the bottom half in our country; we should want to see their net worth growing, in fact growing a good deal faster than for the country as a whole. And by wealth I mean private assets in their own immediate possession—things like bank accounts, homes, college funds, and 401(k)s.
Economists can make the case that payouts from our national social insurance system—Social Security—should be counted as personal wealth. Theoretically, it is an unassailable argument. But some take this to mean we should not worry too much about tangible private assets for the less well to do. If we took that logic to its conclusion, we’d be counting the value of future food stamp use as “wealth” too. There is a world of difference between a monthly check from the government and a financial stake you put together through managing your own affairs. A free people deserve better than a life on allowance money and a debit card.
A revitalized America can provide the framework in which everyone can build their own wealth—with the help of more work, better wages, and constantly improving opportunities and skills. But personal responsibility is the other element. Establishing creditworthiness is up to you. Financial discipline, thrift, and other money habits determine a family’s savings; consistently accumulated savings are the basis of personal wealth and economic freedom. As a practical matter, family stability is central to a household’s wealth prospects. The struggle to save and get ahead is so much harder in homes with just one parent—and even in a revitalized America, that reality is not going to change.
Our government will need to discipline its budget too. Unlike Keynes, who argued government should run surpluses in good times to balance out deficits in bad times, we find an excuse every year to spend more than we bring in. Treat each and every year as an “emergency” for the federal budget, and the excuse will become a prophecy. The path to Japanification is paved with super-high deficits and super-low interest rates. In a revitalized America, ours will be a future of positive interest rates and low budget deficits.
Taxes will have to be higher, too, for at least a generation, since in a revitalized America we will cease spending our children’s inheritance. But future generations will bless us for this—and if we attain dynamic growth, the tax bite shouldn’t smart quite as much.
In modern times, affluent democracies that undertake far-reaching reforms usually do so only after their governments face forcing crises—in the famous Thatcherism, “run out of other people’s money.” America does not yet have that luxury. We are backstopped by over $100 trillion in private wealth, plus the perquisites of printing the world’s reserve currency.
Independence—our freedom—means no one else is going to make us carry out the far-reaching, initially painful tasks of revitalization. Self-reliance means we have to want revitalization—to hunger for it—and to accomplish it all by ourselves.
Why not do so before our backs are to the wall and there is no remaining margin for error? There is a magnificent American future ahead, just waiting to be built. Let’s get to work.
This video and transcript were originally published on the American Enterprise Institute (AEI) website.